Rivalry among shippers caps price of Indian rice exports

Subramani Ra Mancombu | Updated on May 13, 2021

Small exporters undercut rates, high freight charges also keep them on leash

Indian rice exporters have not been able to cash in on the demand for rice in the global market due to intense rivalry among themselves.The rivalry is the main reasons why the increase in (non-Basmati) rice prices in the global market has been limited compared with other agricultural commodities such as wheat, corn and sugar.

Corn prices have increased the most amongst agricultural commodities, rising by 58 per cent since the beginning of the year. Wheat prices have increased nearly 20 per cent, sugar 17 per cent, soyabean 27.5 per cent, while rice rates are up 13 per cent.

Over the past month, rice is one of the commodities that has gained the least with its prices rising a little over five per cent.

According to the Food and Agriculture Organisation (FAO), its all rice price index dropped 2.9 per cent in April compared with March at 110.5 points. Compared with last year, the index was 3.6 per cent lower.

Harvest pressure

The FAO said in its Food Price Monitoring and Analysis that the progress of harvest in India -- the world’s largest exporter -- Vietnam and Thailand had contributed to the decline in prices. The drop in prices was more limited in India since exports continued at a good pace.

According to the International Grains Council, India’s 25 per cent broken parboiled rice is currently quoting at $400 (Rs 29,400) a tonne, up seven per cent compared with the same period a year ago.

Thailand, the second-largest exporter, quoted $471 (Rs 34,600) a tonne for five per cent broken, down seven per cent from the year-ago period, while Vietnam quoted $491 (Rs 36,050), up six per cent year-on-year.

Fierce competition

“The main issue with Indian rice exports is that there is too much competition. Exporters are falling over one another to get orders. This has kept rice prices under check,” said B V Krishna Rao, President of The Rice Exporters’ Association (TREA).

“Financially, Indian exporters are not in a position to dictate terms in the global rice market. Prices are controlled by a few multinational companies and brokers in Europe. They play a major role in the market,” said S Chandrasekharan, a Delhi-based trade analyst.

Exporters and traders point out how Indian exporters tried to outbid one another to gain rice export tenders floated by Bangladesh.

Dhaka had issued global tenders to import at least three lakh tonnes of rice since December last year as its warehouse stocks dropped and its crop was affected by floods last year.

Besides floating tenders, it has bought about three lakh tonnes from India, Thailand and Vietnam on a government-to-government basis.

Wide gap in offers

In the first Bangladesh tender, Indian exporters bid fiercely to win it, offering parboiled rice at less than $405 (Rs 29,750) a tonne. The rice exporting fraternity then said that India could have easily sold the commodity at least $10 (Rs 750) a tonne higher.

Though prices were quoted higher in subsequent tenders, Bangladesh was lucky to get all the rice tenders at below $420 (Rs 30,850) a tonne.

“Small exporters with little exposure to the global market undercut prices and it ensured we offered rice at lower prices,” said TREA’s Rao.

At one point of time, the difference in price was at least $100 (Rs 7,500) a tonne between what India offered and others such as Vietnam and Thailand quoted.

Freight charges

An agri-commodity trader said that higher freight rates also played a role in Indian rice prices being stable.

“Break bulk freight charges have increased two-fold and exporters had to keep that in mind while quoting export prices. For example, break bulk charges to East and West Africa were $35 (Rs 2,600) a tonne before the coronavirus pandemic struck. They have now increased to $95 (Rs 7,000),” the trader, who did not wish to be identified, said.

In view of the rise in freight charges, Indian exporters had no other option but to quote rice at reasonable rates.

“We had an inquiry for 100 per cent broken parboiled for Gambia at $315 (Rs 23,150) a tonne cost and freight. We had to turn it down since rice is available at $275-280 (Rs 20,200-20,575) free-on-board and then the additional freight charge of $95 simply rules out such possibilities,” he said.

Africa, Asia gain

Keeping rice prices under check has helped poor African and Asian nations to a great extent. They have gained since they are primarily rice consumers.

“India offering rice at a fairly affordable price, by design or accident, augurs well for it in the current global scenario where many in these countries have faced hunger,” said Chandrasekaran.

Though suspicions are being raised if the Indian government had signalled exporters to go soft, the trading commodity rejected any such move on the part of the Centre.

“It is a free market and the Government has no control over prices. The rates and offers are market determined,” said the agri-commodity trader.

India’s competitive offers in the global rice market in the last financial year are helping shipments continue at a good pace this fiscal too. “We continue to get good offers from countries such as China and Vietnam,” said TREA’s Rao.

China and Vietnam began buying rice from India after decades, helping the country establish itself as the number one exporter.

Record production

India’s rice exports have been helped by record production last season (July 2019-June 2020), while production this season is projected at a new record.

According to the Ministry of Agriculture and Farmers Welfare, rice production last season was 118.87 million tonnes (mt). This season, it is estimated at 120.32 mt.

This helped non-Basmati rice exports to a record 13.08 mt compared with 5.05 mt in the previous fiscal. Basmati exports totalled 4.63 mt (4.45 mt previous year). Exports of basmati and non-basmati rice made up 45 per cent of the total shipment value of products monitored by the Agricultural and Processed Foods Export Development Authority.

India’s cause was also helped by the Food Corporation of India carrying high stocks. In April last year, it carried 32.23 mt of rice and 25.23 mt of paddy that can help get 16.98 mt of rice. This April, it had 29.11 mt of rice and 26.22 mt of paddy that can yield 17.65 mt of rice.

The stocks were against the mandatory norm for FCI to have 11.5 mt of rice as operational stock and two mt as strategic reserve.

Published on May 12, 2021

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